POSTMODERN MONETARY THEORY

Philip W. Magness

American Institute for Economic Research, February 26, 2019, 5 pgs.,

Reviewer comment:

The article discusses MMT - Modern Monetary Theory in relation to its being claimed as a theoretical support for the massive government deficit spending advocated by proponents of 'Green New Deal' and other welfare state social spending. The MMT has been promoted as a basis for government spending for other purposes such as elimination of unemployment for some years. A book - MMT - was published in 2012 by Professor Randall Wray. See my review of that book- . Currently it seems that Stephanie Kelton is a significant advocate. Read George Selgin's replies to her Huffington Post article. This evaluation of MMT and its policy counter part, Green New Deal. focuses on the absurd 'economics' of the pair and points out that it is being promoted by a fringe group whose theories are far outside the majority of economists.

But, as with so many similar critiques it uses the MMT term that the government is 'spending' and can 'spend' whatever it wants. But the real situation is that the government is confiscating the real output of goods and services produced by the private sector and is exchanging for what it consumes only credit instruments - promises to produce and exchange something of comprable value in some distant future NOW. So MMT and the GND are policy measures to enable the government to sieze even greater proportions of the economic production of the country - ultimately practically all of it, and in the process dictate what that production will be. Seems to me that the analysis of MMT in economic or financial terms misses the main serious point, that to institute it would require a political dictatorship.

In his final section Mr. Magness strikes at a more important, broader, topic; the post-modern academic acceptance of relativity - absense of real standards about evidence and facts.

Mr. Magness agrees with Selgin. He terms GND as "profigae social spending. And notes that its supporters have been simply 'dismissive when pressed about the multi-trillion-dollar price tag of their proposals'. They are "Unable to offer a convincing answer rooted in the traditional public - finance concerns of tax revenue and budgeting, they have insead embraced a concept known as MMT as a sort of hand-waving exercise to make the price tag go away'.

Well, yes they have, but they disagree with and oppose all 'traditional public finance concerns' as well as Capitalism itself.

Mr. Magness proceeds to provide a primer on what this MMT is and involves. He writes: "The basis concept of MMT holds that government can advantageosly use its position as the sole issuer of legal tender to expand public expenditure far beyond what its revenue stream would support". And further, he writes: "In this way, money can be created by the state to pay for almost anything the MMT'ers desire because all debts are payable in the same U.S. currency, though they offer in passing caveat that the monetary expansion at the heart of the scheme can be theoretically reabsorbed at a later date through taxation."

Yes they do, but this focus on the monetary aspect misses the point. The question is what exactly does this mean in real terms. The real process in the market is exchange of existing goods and services from the producing private sector to government consumption in which government exchanges a 'credit' (promise to complete the market exchange by producing something in return. That is bad enough because it is impossible. But then the government is to cancel its promise by taking that 'credit' 'money' back via taxation. Result is simple confiscation the way ancient rulers operated.

Mr. Magness also points out that the real political system would result in even greater manipulation by special interest groups.

The Strange Marketing of Fringe Economics

In this section the author notes that the above discussion is not his main purpose. He then explains his wonderment at the way in which the whole MMT concept is being promoted in the public press by a tiny, he calle, fringe group of promoters and finding media favor dsespite its being dismissed by most economists. He considers MMT to be an extreme "heterodox theory' which it undoubtedly is. It is also nothing new or 'modern' but a reguritation of old 'statist' attempts to justify expanded government political and economic control of society. He cites the Huffington Post article by Professor Stephanie Kellton as an example of an economics 'teacher' claiming MMT is great and then refusing to provide actual evidence or cogent argument. Rather, she simply claims that anyone failing to understand how great MMT is must be failing to understand it.
He skewers the MMT aficianodos by writing: "Most efforts to convince skeptics of MMT take on a similar form ofd eclaiming its alleged truths rather than presenting a carefully argued and coherent case for the position, let alone mustering empirical evidenced in its favor."
Of course this is the typical position of all the proponents of radical progressive policies today - including 'climate change', immigration policy, GND, and the rest.

Mr. Magness points to another aspect by writing: "In a sense, the MMT/ Green New Deal alliance is unavoidable. The only world in which the fiscal dimensions of the Green new Deal and its closely associated jobs-guarantee program are even conceivable is also a world that accepts the truth of MMT as a foundational axiom."

The MMT Epistocracy
In this section he continues to describe the MMT gang's methods. This is great reading, very enjoyable to one who has been denouncing academic for years.
They simply proclaim that their theory is 'obvious and true'. He relates their methods to the broader 'postmodernist moral philosophy and particularly its close cousin, critical theory'. He so rightly exposes the destruction of academic humanities with am "intellectual turn against evidence-based argumentation and scientific falsifiability as methods of testing ideas in a competitive environment." Academics "have a habit of aggressively embracing theories of knowledge that rely upon the mastery of obscure, jargon-cluttered concepts and inwardly referential citation patterns that develop within their own insular clusters of accepted thinkers and the students who trained under those thinkers."
Bravo, well said. Further:
"That is to say, credibility within postmoderism derives from training under the right school of postmodern literary critics, historians, philosophers, and so forth".
Exactly, and well described by David H. Fischer, among others and .
And more: "In this sense, MMT economics is better understood as an attempt to carve out an obscurantist epistocracy of knowledge over a particular narrow slice of public finance. The first word, obscurantist, refers to the strategy of epistemic defense employed by the MMTers. Simply put, they tend to adopt a strategy that eschews arguing for the merits of their ideas in a scientific discourse with competing monetary theories. Rather, the immediate impulse of the MMTers is to queston the standing of their challengers to even engage in criticism".

Another term to describe this entire modernist campaign is 'gnosticism'.

For a general discussion currently in draft form and a larger bibliography of references the reader may visit .